In the Heckscher-Ohlin Model, When Two Countries Begin to Trade

question 34

Multiple Choice

In the Heckscher-Ohlin model, when two countries begin to trade with each other

• A) the relative prices of traded goods in the two countries converge.
• B) relative factor prices in the two countries diverge.
• C) benefits from trade are evenly distributed between the two countries.
• D) all factors in both countries will gain from trade.
• E) all factors in one country will gain, but there may be no gains in the other country.

---

Definitions:

Encourage Consumption

Measures or strategies aimed at increasing consumer spending and demand for goods and services.

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Ability-To-Pay Principle

A taxation principle that suggests taxes should be levied according to an individual's or entity's ability to pay, favoring a more equitable distribution of the tax burden.

U.S. Income Tax

A tax imposed by the U.S. government on the income generated by businesses and individuals within its jurisdiction.